1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA
6 IN RE LUCID GROUP, INC. Case No. 22-cv-02094-AMO 7 SECURITIES LITIGATION ORDER DENYING IN PART AND 8 GRANTING IN PART MOTION TO DISMISS; GRANTING REQUEST FOR
9 JUDICIAL NOTICE
10 Re: Dkt. Nos. 120, 122 11 12 This is a securities fraud case about electric car production. Defendants Lucid Group, Inc. 13 and Chief Executive Officer Peter Rawlinson move to dismiss Lead Plaintiff Sjunde AP-Fonden’s 14 amended consolidated class action complaint. Having found Defendants’ motion to dismiss 15 appropriate for determination on the papers, the Court vacated the May 1, 2025 motion hearing. 16 See Civil Local Rule 7-1(b). The Court assumes familiarity with the facts and procedure of the 17 case, as well as the Court’s prior Order granting in part and denying in part Defendants’ motion to 18 dismiss the consolidated complaint. Having carefully considered the parties’ papers, the relevant 19 legal authority, and good cause appearing, the Court DENIES the motion IN PART (as to 20 Statements 1-4) and GRANTS the motion IN PART (as to Statements 5-16) WITHOUT 21 LEAVE TO AMEND, and GRANTS Defendants’ accompanying request for judicial notice. 22 I. BACKGROUND 23 A. Procedural Background 24 Lead Plaintiff filed the operative amended consolidated complaint (“AC”) on September 25 20, 2024, alleging violations of Section 10(b) of the Securities Exchange Act of 1934 (the 26 “Exchange Act”), 15 U.S.C § 78j(b), and Rule 10b-5 promulgated thereunder, 17 U.S.C. 27 § 240.10b-5, and brings a claim against Rawlinson for control person liability under Section 20(a) 1 On December 6, 2024, Defendants filed a motion to dismiss the AC with a request for 2 judicial notice. Motion to Dismiss the AC (“Mot.”) (ECF 120); Request for Judicial Notice (ECF 3 122). Lead Plaintiff filed an opposition to the motion to dismiss on February 5, 2025, including a 4 response to the request for judicial notice. Opposition to Motion to Dismiss the AC (“Opp.”) 5 (ECF 123). Defendants’ reply followed on March 14, 2025. Reply in Support of Motion to 6 Dismiss (“Reply”) (ECF 125). 7 II. LEGAL STANDARD 8 Federal Rule of Civil Procedure 8 requires a complaint to include “a short and plain 9 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A 10 complaint that fails to meet this standard may be dismissed pursuant to Federal Rule of Civil 11 Procedure 12(b)(6). 12 To overcome a Rule 12(b)(6) motion to dismiss, the factual allegations in the plaintiff’s 13 complaint “ ‘must . . . suggest that the claim has at least a plausible chance of success.’ ” Levitt v. 14 Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014) (quoting In re Century Aluminum Co. Sec. Litig., 15 729 F.3d 1104, 1107 (9th Cir. 2013) (alterations in original)). In ruling on a Rule 12(b)(6) motion, 16 courts “accept factual allegations in the complaint as true and construe the pleadings in the light 17 most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 18 1025, 1031 (9th Cir. 2008) (citation omitted). 19 “[A]llegations in a complaint . . . may not simply recite the elements of a cause of action, 20 but must contain sufficient allegations of underlying facts to give fair notice and to enable the 21 opposing party to defend itself effectively.” Levitt, 765 F.3d at 1135 (quoting Starr v. Baca, 652 22 F.3d 1202, 1216 (9th Cir. 2011)). The court may dismiss a claim “where there is either a lack of a 23 cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal claim.” 24 Hinds Invs., L.P. v. Angioli, 654 F.3d 846, 850 (9th Cir. 2011) (citing Johnson v. Riverside 25 Healthcare Sys., LP, 534 F.3d 1116, 1121 (9th Cir. 2008)). “[T]he non-conclusory ‘factual 26 content’ and reasonable inferences from that content must be plausibly suggestive of a claim 27 entitling the plaintiff to relief.” Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) 1 For claims sounding in fraud or mistake, a plaintiff must “state with particularity the 2 circumstances regarding the fraud or mistake.” Fed. R. Civ. P. 9(b). A plaintiff must set forth 3 “ ‘the who, what, when, where, and how’ of the misconduct charged.” Vess v. Ciba-Geigy Corp. 4 USA, 317 F.3d 1097, 1107 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 5 1997)). 6 A claim for violations of Section 10(b) and Rule 10b-5 “must meet both the heightened 7 pleading requirements for fraud claims under Fed. R. Civ. P. 9(b) . . . and the exacting pleading 8 requirements . . . of the Private Securities Litigation Reform Act (‘PSLRA’) . . . .” In re Quality 9 Systems, Inc. Sec. Litig., 865 F.3d 1130, 1140 (9th Cir. 2017) (citing Tellabs, Inc. v. Makor Issues 10 & Rights, Ltd., 551 U.S. 308, 313 (2007)). In assessing whether a securities fraud claim meets this 11 heightened pleading standard, “courts must consider the complaint in its entirety, as well as other 12 sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in particular, 13 documents incorporated into the complaint by reference, and matters of which a court may take 14 judicial notice.” Tellabs, 551 U.S. at 322-23 (citations omitted). 15 III. DISCUSSION 16 A. Defendants’ Request for Judicial Notice 17 Defendants ask the Court to take judicial notice of eight documents, the first seven of 18 which the Court previously took judicial notice, see Order (ECF 103) at 5-8, including forms filed 19 with the SEC and earnings call transcripts. See Request for Judicial Notice at 3-4. In addition, 20 Defendants ask the Court to take judicial notice of Lucid’s Q1 2022 Earnings Presentation, dated 21 May 5, 2022 (Exhibit 8). Id. at 4. Lead Plaintiff does not object to Defendants’ request that the 22 Court take judicial notice of Exhibits 1-8, to the extent Defendants rely on those documents only 23 to show “certain representations were made to the market.” Opp. at 34 n.28. 24 A district court may take judicial notice of facts that are “not subject to reasonable dispute” 25 because they are (1) “generally known within the trial court’s territorial jurisdiction,” or (2) “can 26 be accurately and readily determined from sources whose accuracy cannot reasonably be 27 questioned.” Fed. R. Evid. 201(b); United States v. Bernal-Obeso, 989 F.2d 331, 333 (9th Cir. 1 Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018) (quoting Lee v. City of Los 2 Angeles, 250 F.3d 668, 689 (9th Cir. 2001)). A court cannot, however, “take judicial notice of 3 disputed facts contained in such public records.” Id. Accordingly, the Court GRANTS the 4 request for judicial notice of Exhibits 1-8, which consist of SEC filings, earnings calls transcripts, 5 press releases, and an earnings presentation, for the limited purpose of noting the representations 6 Defendants made to the market and only to the extent Defendants have specifically identified any 7 such representations within those documents. See Weston v. DocuSign, Inc., 669 F. Supp. 3d 849, 8 872 (N.D. Cal. 2023). The Court does not take judicial notice of the contents of those documents 9 for their truth. See Khoja, 899 F.3d at 1000 (“To the extent that the district court judicially noticed 10 the . . . investors’ call transcript for the purpose for which was offered, i.e., to determine what the 11 investors knew . . . at that time, the district court abused its discretion.”). 12 B. Motion to Dismiss 13 The Court previously determined that Statements 1 to 4 were sufficiently pleaded. See 14 Order at 20, 25. Defendants ask the Court to “consider anew” its prior determinations that 15 Statements 3 and 4 are sufficient to survive dismissal. See Mot. 9-10, 18-21. The Court rejects 16 Defendants’ improper request for reconsideration of any determinations made in its August 8, 17 2024 order. See Civ. L.R. 7-9 (setting out the requirements for filing a motion for 18 reconsideration). Accordingly, Defendant’s motion is DENIED as to Statements 1 to 4. 19 Defendants also move to dismiss Lead Plaintiff’s Section 10(b) claim and the derivative 20 Section 20(a) claim as to Statements 5-16. Mot. at 13, 32. Because the Section 20(a) claim is 21 derivative, the Court addresses the Section 10(b) claim first. 22 1. Section 10(b) and Rule 10b-5 Claim 23 Defendants argue that Lead Plaintiff has failed to state a claim under Section 10(b) and 24 Rule 10b-5, which requires that a plaintiff allege “(1) a material misrepresentation or omission by 25 the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the 26 purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic 27 loss; and (6) loss causation.’ ” Quality Systems, 865 F.3d at 1140-41 (quoting Halliburton Co. v. 1 claim fails for two main reasons: (1) Plaintiff still fails to plead any actionable misstatement or 2 omission, id. at 13-26; and (2) Plaintiff has not pleaded particularized facts sufficient to support a 3 strong inference of scienter, id. at 26-32. Because it is dispositive, the Court first addresses 4 whether Plaintiff has sufficiently alleged an actionable misstatement or omission as to Statements 5 5-16. 6 “Where the alleged fraud is a material misstatement or omission, ‘the complaint shall 7 specify (1) each statement alleged to have been misleading, (2) the reason or reasons why the 8 statement is misleading, and, (3) if an allegation regarding the statement or omission is made on 9 information and belief, the complaint shall state with particularity all facts on which that belief is 10 formed.’ ” Khoja, 899 F.3d at 1008 (quoting 15 U.S.C. § 78u-4(b)(1)). “In the securities fraud 11 context, statements and omissions are actionably false or misleading if they directly contradict 12 what the defendant knew at that time, or create an impression of a state of affairs that differs in a 13 material way from the one that actually exists[.]” In re Facebook, Inc. Sec. Litig., 87 F.4th 934, 14 948 (9th Cir. 2023) (internal quotations and citations omitted). 15 Lead Plaintiff alleges that the following statements were false or materially misleading:1
16 • In a November 15, 2021 press release titled Lucid Announces Third Quarter 2021 17 Financial Results and Lucid Air Wins MotorTrend Car of the Year, issued on Form 8- K: 18 1. Rawlinson stated: “We see significant demand for the award-winning Lucid Air, 19 with accelerating reservations as we ramp production at our factory in Arizona. We remain confident in our ability to achieve 20,000 units in 2022. This target is not 20 without risk, given ongoing challenges facing the automotive industry with global 21 disruptions to supply chains and logistics. We are taking steps to mitigate these 22 1 Lead Plaintiff excises from the AC the portions of Statements 2, 8, and 10 that the Court 23 previously concluded failed to adequately allege falsity because they “merely concern Lucid’s commitment to quality, without relying on quality as an excuse for production delays.” See Order 24 at 16; compare Appendix to AC (ECF 109) with Appendix to Consolidated Complaint (ECF 78- 25 2). Lead Plaintiff also excises from the AC the portions of Statements 1 and 4 concerning mitigation of challenges and risks which the Court previously determined inadequately alleged 26 falsity. See id. Lead Plaintiff further omits from the AC the following statements previously raised in the consolidated complaint (and found to be deficient in the Court’s August 8, 2024 27 order): Consolidated Complaint Statements 2, 6, 7, 11, 13, 14, 18, 20, 21, 22, 23, 25, 26, and 30. challenges, however, and look forward to the launch of the Grand Touring, 1 Touring, and Pure versions of Lucid Air through 2022.”2 AC ¶ 396; Appendix to 2 AC at 2.
3 • During a 3Q21 Earnings Call held November 15, 2021:
4 2. Rawlinson stated: “Even in a challenging environment as COVID-19 continues to present numerous obstacles for the auto industry and supply chain. Lucid is no 5 stranger to this, but we have continued to deliver against our time line. . . .” AC 6 ¶ 397; Appendix to AC at 6.
7 • During an interview with CNBC’s Jim Cramer on November 16, 2021:
8 3. Cramer asked: “But you have said, let’s be clear about this, you have a lot of demand, 17,000. And that’s not a problem for you to make. But you have dreams. 9 Let’s hopefully realities [sic] of 500,000 production and more.” AC ¶ 403; 10 Appendix to AC at 7.
11 Rawlinson responded: “Absolutely. We already have a factory scale for 34,000 units a year. As soon as we can get this quality parts to the line, we can spool 12 that up. The factory is there and ready for 34,000 units per annum.” AC ¶ 404; 13 Appendix to AC at 7.
14 4. Cramer also asked: “So if I go under the hood, which fortunately could be in a size of a suitcase, will I find the same Semiconductor shortage problem? Will I find the 15 labor problem? I find all the things that are plaguing every other company in the automotive business. Or would they be looking at, say, an Apple phone and 16 saying, you know what? Look, we’ve got the technology, the customers love it, 17 and let’s stop worrying about things that don’t really mean anything to us.” AC ¶ 405; Appendix to AC at 8. 18 Rawlinson responded: “We’ve been able to mitigate the semiconductor risk 19 because as a tech company, we design all our printed circuit boards, our PCBAs, in house, and that means that we can design for alternative sourcing and different 20 types of chip and that will reduce the risk. So we’ve been able to mitigate that risk. 21 That isn’t to say we aren’t vulnerable to today’s supply chain shortages that the entire industry is facing, in fact, many industries are facing, that is something 22 that we are a challenge with and we have mitigation plans for.” AC ¶ 406; Appendix to AC at 8-9. 23 • In a February 28, 2022 press release titled Lucid Announces Fourth Quarter and Full 24 Year 2021 Financial Results, Updates 2022 Outlook, issued on Form 8-K: 25 5. Defendants stated: “Updating 2022 production outlook for Lucid Air to a range of 26 12,000 to 14,000 vehicles.” AC ¶ 411; Appendix to AC at 12. 27 1 6. Rawlinson stated: “Looking ahead, we’re updating our outlook for 2022 2 production to a range of 12,000 to 14,000 vehicles. This reflects the extraordinary supply chain and logistics challenges we’ve encountered and our 3 unrelenting focus on delivering the highest quality products. AC ¶ 412; Appendix to AC at 14-15. 4 • During a 4Q21 & FY2021 Earnings Call held February 28, 2022: 5
6 7. Rawlinson stated: “In the more immediate term, like many manufacturers, our production has been and indeed continued to be impacted by supply chain 7 challenges. As you saw from our press release today, we have updated our 2022 production outlook for Lucid Air to a range of 12,000 to 14,000 vehicles.” AC 8 ¶ 414; Appendix to AC at 19-20.
9 8. Rawlinson also stated: “We accomplished deep deliveries against the backdrop of 10 an extraordinary supply chain and supply quality challenges. Indeed, we could have chosen to build faster, but we elected not to sacrifice quality, given our 11 unwavering commitment to the highest standards.” AC ¶ 415; Appendix to AC at 24-25. 12 9. Analyst Itay Michaeli (“Michaeli”), Citigroup Inc., Research Division, Director & 13 Global Head of Autos Sector, asked Rawlinson: “A couple of questions. Just first, 14 going back to the supply chain pressures. I was hoping you can maybe articulate it sounds like you expect most of the recovery to happen in the second half of the 15 year. Maybe talk about how much visibility you have over the next few months with some of the suppliers you mentioned and just the degree of confidence of how 16 to think about the cadence of improvement in production throughout the year.” AC ¶ 416; Appendix to AC at 25-26. 17
18 Rawlinson responded: “Yes. Well, we have an earning focus on addressing some of the supply chain challenges. We see them to continue for the next few months. 19 But we see an uptake in the second half of the year. So we’re really optimistic that we’re going to be able to resolve these. And again, this is a small handful of 20 suppliers. We’re not talking about fundamental technologies here. We’re 21 talking largely paradoxically commodity suppliers, finishes, carpet, glass and things like that. And unfortunately, you can’t sell a single quality car unless 22 those -- particularly those visible parts are absolutely perfect. So we’re very optimistic that we will resolve, but it’s going to take a few months, and the second 23 half of the year, we’ll see a significant uptake. And our guidance is based upon that premise.” AC ¶ 417; Appendix to AC at 26-27. 24
25 10. John Joseph Murphy, BofA Securities, Research Division, MD and Lead United States Auto Analyst, asked: “[A]s you think about the causal factors for the 26 reduction in your planned production this year, I mean, you’re citing supply chain. It appears that maybe some of the capacity expansion and reorganization has put 27 forth or been prioritized over ramping volume in the near term for the benefit in the wondering if you could kind of bucket those or maybe rank those in order of sort of 1 impact. And then also as we think about this, does this change your outlook for 2 2023 volumes? Or is this sort of short-term pain for long-term gain?” AC ¶ 418; Appendix to AC at 30-31. 3 Rawlinson responded: “Those are interesting points. I mean, first of all, I would 4 say that we have been primarily constrained. We’ve got about 250 suppliers worldwide, notionally about 3,000 parts. And this has been really a phenomenon 5 of just a small handful of our 250 suppliers. Paradoxically, we’ve been mainly 6 impacted in a commodity supply parts. For example, finished parts, trim parts for the exterior, even glass and carpet. So it’s not the core technologies of the 7 vehicle that have been largely impacting us here. And we have – you’re right, we’ve chosen quality over volume.” AC ¶ 419; Appendix to AC at 31-32. 8 • A March 17, 2022 article entitled Rising Costs Have Lucid CEO Eyeing Price Hike for 9 Future Electric Cars stated: 10 11. Lucid in February cut its production forecast for this year to a range of 12,000 to 11 14,000, from its original target of 20,000 vehicles, citing “extraordinary supply chain and logistics challenges.” Its shares slid after that announcement. AC ¶ 426; 12 Appendix to AC at 33.
13 Rawlinson on Thursday said the bottlenecks were caused by a handful of 14 suppliers for windshield glass, carpeting and some exterior trim parts. “I’m super frustrated because we’re not gated by silicon chips, we’re not gated by our ability 15 to make electric motors,” Rawlinson said. AC ¶ 426; ECF 109 at 34.
16 • In a May 5, 2022 press release titled Lucid Reports First Quarter 2022 Financial 17 Results, issued on Form 8-K:
18 12. Defendants stated: “Lucid reiterated its 2022 production volume outlook of 12,000 to 14,000 vehicles” and Lucid’s “[p]roduction volume outlook for 2022 remains 19 on track at 12,000 to 14,000 vehicles.” AC ¶ 430; Appendix to AC at 36.
20 • During a 1Q22 Earnings Call held May 5, 2022: 21 13. Rawlinson stated: “I do want to highlight that supply chain dynamics are very 22 fluid, and the COVID lockdowns in China that’s impacting others in the industry are also resulting in some bottlenecks for us.” AC ¶ 431; Appendix to AC at 38. 23 14. Itay Michaeli asked: “Any kind of early update on Q2, maybe an April number?” 24 AC ¶ 432; Appendix to AC at 41. 25 Rawlinson responded: “We’re reiterating our 12,000 to 14,000 vehicle production 26 forecast for ’22. And that’s based on the information we have at this point, combined with our current mitigation plans.” AC ¶ 433; Appendix to AC at 41. 27 // 1 • A slide from a May 5, 2022 1Q22 Earnings Call Presentation stated: 2 15. “Production Volume • 12,000-14,000 vehicles.” AC ¶ 434; Appendix to AC at 43. 3 • During a May 20, 2022 Interview with Lara Habib Chamat of Al Arabiya News 4 Channel:
5 16. Lara asked: “Let’s discuss now your global operations. We know that the company 6 is facing some issues in delivering the cars due to supply chain disruptions. We know that Lucid lowered the annual production target to 12,000 cars versus original 7 prediction of 20,000 cars for this year. When do you expect when do you expect things to look better?” AC ¶ 439; Appendix to AC at 45-46. 8 Rawlinson responded: “Our challenge now is to ramp up the volume of this 9 incredible machine. We’re facing global supply chain challenges, as is all the 10 auto industry and other industries. And we’re working assiduously to overcome our near-term challenges with commodity goods are being resolved and we’re 11 looking forward to hitting our 12 to 14,000 units that we’re targeting for production this year.” AC ¶ 440; Appendix to AC at 46. 12
13 Defendants attack the sufficiency of Lead Plaintiff’s allegations with respect to statements 14 about Lucid’s production targets (Statements 5, 6, 7, 12, 14, 15, 16) and the reasons for Lucid’s 15 production delays (Statements 6, 7, 8, 9, 10, 11, 13, 16). Mot. at 13-18. The Court considers each 16 of these categories of statements in turn. 17 a. Production Targets 18 The Court previously held that portions of statements concerning Lucid’s production 19 targets (Statements 5, 6, 7, 12, 14, 15, and 16),3 were not adequately pleaded because the 20 complaint “lack[ed] allegations indicating that the speaker possessed contemporaneous knowledge 21 that the statements were false when made”: Statements 5 (“Updating 2022 production outlook for 22 Lucid Air to a range of 12,000 to 14,000 vehicles.”), 6 (“Looking ahead, we’re updating our 23 outlook for production to a range of 12,000 to 14,000 vehicles.”), 7 (“[W]e have updated our 2022 24 production outlook for Lucid Air to a range of 12,000 to 14,000 vehicles.”), 12 (“ ‘Lucid reiterated 25 its 2022 production volume outlook of 12,000 to 14,000 vehicles’ and that ‘Lucid’s [p]roduction 26 27 1 volume outlook for 2022 remains on track at 12,000 to 14,000 vehicles.’ ”) (modification in 2 original), 14 (“We’re reiterating our 12,000 to 14,000 vehicle production forecast for ’22.”), 15 3 (“Production Volume • 12,000-14,000 vehicles.”), 16 (“[W]e’re looking forward to hitting our 12 4 to 14,000 units that we’re targeting for production this year.”). See Order at 20. 5 The Court’s prior order highlighted that the allegation that Rawlinson’s acknowledgement 6 (in September or November 2021) that Lucid would make less than 10,000 vehicles in 2022, did 7 not demonstrate that he still held such a view at the time of his 2022 production target statements 8 made in February 2022 (Statements 5, 6, and 7), March 2022 (Statement 11), and May 2022 9 (Statements 12, 14, 15, and 16). See Order at 20 (“[Statements] discussing projection targets are 10 not adequately pleaded because the complaint lacks allegations indicating that the speaker 11 possessed contemporaneous knowledge that the statements were false when made.”). The Court’s 12 prior order also explained that the alleged discussion between a former employee and Rawlinson 13 in February 2022 merely established Rawlinson knew of inventory issues, but did not show falsity 14 as to any contemporaneous statements absent an allegation that Rawlinson had adopted the former 15 employee’s views about Lucid’s inability to meet production targets at that time.4 Order at 20 n.9. 16 In an effort to sufficiently allege contemporaneous knowledge of falsity, Lead Plaintiff 17 adds two main categories of statements: those that establish that Lucid’s internal logistics issues 18 and production shortfalls persisted throughout 2022, and those that support that Rawlinson was 19 aware of Lucid’s ongoing logistics issues and production shortfalls. Opp. at 10. For example, 20 Lead Plaintiff adds allegations to the AC that (1) FE-1 told Rawlinson in late January or early 21 February 2022 that “Lucid’s many internal logistics issues were still present and still stalling 22 production” (AC ¶ 29); (2) Lucid’s inventory logistics problems remained acute and persisted 23 from late 2021 through at least mid-2022 (e.g., ¶¶ 145, 156, 159-61, 192, 215, 219-20, 315-16); 24
25 4 The prior order, Order at 20 n.9, appears to mistakenly attribute these allegations to FE-2, when 26 they derived from FE-1. See Consolidated Complaint (ECF 78) ¶ 172 (“In particular, in late January or early February 2022, FE-1 met with Rawlinson during his visit to the Warehouse. 27 During their discussion, FE-1 told Rawlinson of the problems at Lucid’s warehouse, and why it 1 (3) Rawlinson was frequently onsite at the Warehouse in 2022 (e.g., ¶¶ 241-44, 305); (4) 2 Rawlinson was aware of at least some of Lucid’s logistics problems in 2022 (e.g., ¶¶ 305, 312-14, 3 320); and (5) various former employees held the belief that Lucid’s 2022 production target was 4 impossible (e.g., ¶¶ 313, 317, 319). 5 Lead Plaintiff primarily posits that they have sufficiently alleged contemporaneous 6 knowledge because Lucid’s logistics problems continued unabated from the time Rawlinson 7 stated, in late October or early November 2021, that Lucid would produce less than 10,000 8 vehicles in 2022, thus Rawlinson necessarily must have maintained that same view at the time of 9 his statements in February, March, and May 2022. See Opp. at 20, 29-30. Lead Plaintiff fails to 10 persuade because the new allegations leave open the possibility Rawlinson may have changed his 11 view in the months following his late-2021 view of Lucid’s ability to meet its 2022 production 12 targets. See Century Aluminum, 729 F.3d at 1108 (noting that where two explanations are merely 13 possible, “[s]omething more is needed, such as facts tending to exclude the possibility that the 14 alternative explanation is true[.]” (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554 (2007)). 15 Lead Plaintiff has not alleged with specificity what information Rawlinson received prior to 16 making the 2022 statements, nor what his reaction to or interpretation was of that specific data. 17 See Nursing Home Pension Fund Local 144 v. Oracle Corp., 380 F.3d 1226, 1230 (9th Cir. 2004) 18 (“The most direct way to show both that a statement was false when made and that the party 19 making the statement knew that it was false is via contemporaneous reports or data, available to 20 the party, which contradict the statement.”); see also Wochos v. Tesla, 985 F.3d 1180, 1194 (9th 21 Cir. 2021) (holding that defendants failed to plead that Tesla CEO Musk “adopted the 22 conservative timeline for production on which these employees’ pessimism was based.”). Thus, 23 Lead Plaintiff’s allegations remain insufficient where they do not allege that Rawlinson knew or 24 had contemporaneously adopted the view that, at the time of his statements, Lucid’s 2022 25 production targets were impossible. See id. 26 Thus, the production target statements (Statements 5, 6, 7, 12, 14, 15, and 16) remain 27 inactionable for failure to show contemporaneous knowledge of falsity. 1 b. Reasons for Delay 2 Defendants challenge the sufficiency of the allegations regarding Statements 6, 7, 8, 9, 10, 3 11, 13, and 16, which were all made between February 2022 and May 2022: Statements 6 4 (referring to “extraordinary supply chain and logistics challenges [Lucid] encountered and [its] 5 unrelenting focus on delivery the highest-quality products”), 7 (“like many manufacturers, 6 [Lucid’s] production has been and indeed continued to be impacted by supply chain challenges”), 7 8 (stating that Lucid “could have chosen to build faster”), 9 (referencing supplier issues), 10 8 (referencing supplier issues), 11 (stating that “bottlenecks were caused by a handful of suppliers” 9 and that Lucid was “gated by silicon chips,” not the “ability to make electric motors”), 13 10 (“COVID lockdowns in China that’s impacting others in the industry are also resulting in some 11 bottlenecks for us”), and 16 (“[W]e’re facing global supply chain challenges, as is all the auto 12 industry and other industries.”). 13 The prior Court order found that Lead Plaintiff insufficiently pleaded falsity as to these 14 statements “for the same reasons the statements discussing production targets fail[ed]”: Lead 15 Plaintiff failed to allege that Rawlinson had contemporaneous knowledge that his statements about 16 the impact of supply chain challenges on production were false when made. See Order at 25, 17 referring to pp. 17-20. 18 In an attempt to cure this deficiency, Lead Plaintiff adds to the AC categories of statements 19 demonstrating that Lucid’s internal logistics issues and production shortfalls persisted throughout 20 2022, and that Rawlinson was aware of Lucid’s ongoing logistics issues and production shortfalls. 21 Opp. at 10. In addition, Lead Plaintiff adds allegations to the AC that additional former 22 employees held the view that Lucid’s internal logistics problems were causing 90% of Lucid’s 23 production delays in 2022.5 See Opp. at 13; see also, e.g., AC ¶¶ 31 (FE-11, who worked from 24 25 5 The consolidated complaint raised similar allegations about FEs’ perceptions that Lucid’s production delays in 2022 were attributable to their internal logistics issues. See Consolidated 26 Complaint ¶ 263 (now AC ¶ 282) (FE-8, who worked for Lucid from mid-2021 until early 2022, believed that 90% of the production delays were caused by internal logistics problems because 27 “that’s where the bottleneck was.”); id. ¶¶ 269 (now AC ¶ 289) (FE-3, who was employed in 1 Lucid from fall 2021 to late 2022 (AC ¶ 72), stated that it was common knowledge within Lucid 2 that it could never hit the 12,000 to 14,000 product target “given its pervasive and deeply 3 ingrained internal logistics issues”); 321 (FE-12, who worked as a manager for a third-party 4 logistics contractor at Lucid’s Warehouse from summer 2021 to early spring 2022 (AC ¶ 73), 5 estimated that 90% of the time, Lucid blamed the Warehouse not getting parts to the production 6 line as the reason that Lucid was missing its production targets). 7 Lead Plaintiff further alleges that Rawlinson must have known of the impact of the 8 logistics issues on Lucid’s ability to meet its production targets given Rawlinson’s frequent onsite 9 presence and the existence of daily meetings discussing Lucid’s production shortfalls and logistics 10 challenges in 2022, at least some of which Rawlinson attended and the contents of which would 11 have been escalated to him. See, e.g., AC ¶¶ 359 (describing how Rawlinson stated during an 12 earnings call held in May 2023 that he was on site “night and day” throughout 2022 “to resolve 13 logistics and supply chain issues”); 313 (FE-11, who was a shift supervisor at Lucid’s Warehouse 14 from fall 2021 to late 2022 (AC ¶ 72), describing daily 7 a.m. logistics meetings, from which 15 executives would “escalate” information to Rawlinson, and stating that the executives made 16 comments such as “Rawlinson is upset with this” or “Rawlinson is aware of this and looking for a 17 solution”). 18 Even with these additional allegations, the Court finds that Lead Plaintiff still insufficiently 19 alleges that Rawlinson himself knew or shared the perception held by others that it was Lucid’s 20 internal logistics issues (versus external supply chain or pandemic-related issues) that were the 21 primary cause of Lucid’s production delays at the time of his 2022 statements. Without more 22 detailed allegations as to what specific reports Rawlinson received, when precisely he received 23 them, and how he reacted to or interpreted those reports, the pleadings do not sufficiently allege 24 that Rawlinson had contemporaneous knowledge of falsity at the time of his 2022 statements. See 25 Khoja, 899 F.3d at 1008 (“Falsity is alleged when a plaintiff points to defendant’s statements that 26 directly contradict what the defendant knew at that time.”) (citations omitted). 27 1 Thus, Statements 6, 7, 9, 10, 11, 13, and 16 – all of which alluded to past and future supply 2 chain and pandemic-related issues – are not actionably false. Unlike the previously-upheld 3 Statements 3 and 4, which were made close-in-time to Rawlinson’s late-2021 acknowledgement 4 that Lucid’s internal logistics issues were preventing Lucid from meeting its production targets, 5 Lead Plaintiff alleges no similar close-in-time expressions of opinion or belief by Rawlinson, or 6 adoption of others’ interpretation of the cause of Lucid’s production delays, to allege 7 contemporaneous knowledge of falsity at the time of making these statements. 8 Statement 8 is distinct from the rest of the production delay-related statements, and merits 9 separate attention. Statement 8 arose in the context of an Earnings Call held on February 28, 10 2022, in which Rawlinson stated: “Indeed, we could have chosen to build faster, but we elected 11 not to sacrifice quality, given our unwavering commitment to the highest standards.” See AC 12 ¶ 415; Appendix to AC at 24-25. Statement 8 could only be actionably false if there were truly no 13 way in which Lucid could have built faster. See also Wochos, 985 F.3d at 1196 (“Tesla’s 14 remark . . . that ‘great progress’ was being made on battery production would potentially be an 15 actionable false statement only if, as the district court put it, Tesla had been ‘making no progress 16 at all.’ Plaintiffs pleaded no facts that would establish falsity in that sense.”). Because Lucid 17 conceivably could have built faster, for example by utilizing damaged or noncompliant parts, see, 18 e.g., AC ¶ 219 (FE-12 estimating that 5-10% of the parts Lucid received had to be scrapped due to 19 damage), it is possible for Statement 8 to be true, and thus Statement 8 is not actionably false. See 20 Wochos, 985 F.3d at 1196. 21 Thus, the contested statements concerning the cause of Lucid’s delayed production 22 (Statements 6, 7, 8, 9, 10, 11, 13, 16) are inactionable for failure to show contemporaneous 23 knowledge of falsity. 24 Having found that Lead Plaintiff has failed to adequately plead that Statements 5-16 are 25 false, the Court need not consider whether they are protected by the PSLRA’s Safe Harbor 26 provision, are statements of opinion, or constitute mere corporate puffery.6 27 1 2. Leave to Amend 2 Defendants ask the Court to dismiss Lead Plaintiff’s claims without leave to amend as to 3 Statements 5-16 on the basis that the Court’s prior order gave Lead Plaintiff clear guidance on the 4 deficiencies of the claim, and Lead Plaintiff did not cure them in the AC. Mot. at 32. Lead 5 Plaintiff requests leave to amend any portion of the AC deemed insufficient. Opp at 34. 6 Because Lead Plaintiff has not cured the deficiencies the Court identified in the 7 consolidated complaint, and has failed to identify additional facts Lead Plaintiff would allege in a 8 second amended consolidated complaint that would cure those deficiencies, the Court determines 9 amendment would be futile. See Leadsinger, Inc. v. BMG Music Pub., 512 F.3d 522, 532 (9th Cir. 10 2008) (finding no abuse of discretion in denying leave to amend where the amendment would be 11 futile). Lead Plaintiff’s claims as to Statements 5-16 are therefore DISMISSED WITHOUT 12 LEAVE TO AMEND. 13 3. Section 20(a) Claim 14 Under Section 20(a) of the Exchange Act, “certain ‘controlling’ individuals [are] also 15 liable for violations of [S]ection 10(b) and its underlying regulations.” Zucco Partners, LLC v. 16 Digimarc Corp., 552 F.3d 981, 990 (9th Cir. 2009) (citing 15 U.S.C. § 78t(a)). Because a Section 17 20(a) claim is derivative, “a defendant employee of a corporation who has violated the securities 18 laws will be jointly and severally liable to the plaintiff, as long as the plaintiff demonstrates ‘a 19 primary violation of federal securities law’ and that ‘the defendant exercised actual power or 20 control over the primary violator.’ ” Id. (citation omitted). 21 Because Lead Plaintiff’s Section 20(a) claim rises and falls with its claim under Section 22 10(b), this claim is DISMISSED WITHOUT LEAVE TO AMEND to the same extent as the 23 Section 10(b) claim (i.e., Statements 5-16). 24 The Section 20(a) claim otherwise survives consistent with the Court’s analysis of the 25 viable portion of the Section 10(b) claim (i.e., Statements 1-4). See Zaidi v. Adamas Pharms., 26 Inc., 650 F. Supp. 3d 848, 865 (N.D. Cal. 2023). 27 1 IV. CONCLUSION 2 For the reasons set forth above, Defendants’ motion to dismiss the AC is DENIED IN 3 PART (Statements 1-4) AND GRANTED IN PART (Statements 5-16) WITHOUT LEAVE 4 || TO AMEND. Defendants’ request for judicial notice is GRANTED. 5 The Court SETS an initial case management conference for July 16, 2025 at 10:00 AM in 6 San Francisco, Courtroom 10, 19th Floor. The parties SHALL file a case management statement 7 by noon on July 8, 2025. 8 IT IS SO ORDERED. 9 Dated: May 22, 2025 Woc □□ 7 10 (é ARACELI MARTINEZ-OLGUIN 11 United States District Judge a 12
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